The Assembly's budget-balancing plan totals $12.5 billion over two budget years, including the money raised by increased license fees. That is a sharp contrast to Davis' proposal, which asked lawmakers to approve $10 billion in cuts only.

The Democratic governor chided lawmakers after their votes, saying they were nibbling around the edges at closing a $34.6 billion shortfall over the next 18 months. Davis, who has proposed a $96.4 billion budget for next fiscal year, has also said he doesn't favor raising the vehicle license fee.

A Senate budget panel has approved a similar package of cuts, and the Legislature is expected to take final action on both the cuts and vehicle fee increase before the end of next week.

Included in the Assembly's plan are a $25 per pupil per year cut for schools, a mechanism to allow early release of some prisoners and an increase in state park fees.

The increase in the vehicle license fee would cost an average car owner $109 a year, and the money would go to local governments, where much of it would pay for police and fire protection.

"In difficult times, I think it is a reasonable thing to ask people to pay a little bit more for police and fire," said Assemblywoman Jenny Oropeza, D- Long Beach, chairwoman of the Budget Committee.

Before 1998, the vehicle license fee was 2 percent, with the money going to local governments. It was then decreased to .65 percent of a car's value, but the state uses a general fund subsidy to offset the loss to cities and counties.

Davis has proposed eliminating that gap -- cutting $4 billion from local government.

But police and fire officials have flooded the Capitol with stories of public safety being compromised. Fremont has already laid off seven police officers, and Oakland Mayor Jerry Brown said this week he has ordered the department to cut overtime.

The bill approved by the Assembly panel would give the governor's finance director authority to automatically increase vehicle license fees to the 2 percent level when the state falls on hard times.

Davis' Director of Finance Steve Peace said he recommends that the governor veto the bill, saying it does not help solve the state's budget problem.

"It's the crack cocaine of local government," he said.

Oropeza said lawmakers know the money will not help the state, but said the point is to keep a promise to local governments.

Republicans are opposed to increasing the license fee, believing the state should make further cuts to continue the payment to local governments.

In addition to the license fee increase, lawmakers will examine Davis' proposed cigarette tax increase and one percentage point sales tax increase.

Lawmakers propose saving money by allowing prisoners to accrue credit for work even if they are only on a waiting list for a job. That will allow more prisoners to be released early, saving the state $69 million in the budget year.

Davis opposes early release for prisoners and said the Legislature's overall package of cuts doesn't go nearly far enough.

"We need to bite the bullet now. It's the only way we can avoid worse pain down the road and maintain the state's credit rating," he said.

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